Insolvency: Cash Is king: New Rules Against Late Payment
20/07/2021

Late payment puts a substantial dent in companies’ cash flow and, ultimately, their continuity. In recent years, payment behavior between businesses (B2B), and between businesses and government authorities (B2G), has deteriorated. Studies show that more than 30% of invoices issued in 2018 were not paid on time, and that late payment costs Belgian companies EUR 10 billion per year, the equivalent of 20,000 jobs. This trend was further exacerbated by the Covid-19 crisis, which put additional stress on companies’ cash flow. 

Against this backdrop, the Belgian Federal Parliament passed a bill on 15 July 2021 to amend the 2 August 2002 Act on Late Payment in Commercial Transactions (hereinafter, the “Act”). It aims, in particular, to improve the protection of SMEs facing liquidity problems and a weaker bargaining position against large companies. The new provisions of the Act will enter into force on the first day of the sixth month following publication in the Belgian State Gazette. The key amendments to the Act are summarized below:

Maximum payment term of 60 days: as was already the case for B2B transactions  in which the creditor (but not the debtor) was a SME and for all B2G transactions, the parties may no longer agree on a payment term that exceeds 60 calendar days. Any clause providing for a longer payment term is null and void;
The so-called “verification period” as part of the payment term: previously, the Act allowed parties to both B2B and B2G transactions to agree on a “verification period” (i.e. to check the goods delivered/services performed or the invoice) which could last up to 30 days after the agreed payment term. The “verification period” is now included in the payment term agreed by the parties;
The date of receipt of the invoice may not be set by contract: in order to prevent parties from circumventing the shorter payment terms imposed by the Act (as amended), the creditor and the debtor in a B2B transaction can no longer agree on the date of receipt of the invoice. This prohibition already existed for B2G dealings. Moreover, in both B2B and B2G transactions, the debtor is now formally obliged to provide the creditor with all the information necessary for issuing the invoice. The debtor must do so no later than at the time of receipt of the goods or performance of the services;
Interest and lump sum for recovery costs automatically due: interest (at the specific rate provided in the Act) will now begin to accrue ipso jure (i.e. without a formal notice of default being required) for both B2B and B2G transactions in the event of late payment. In addition, a 40 EUR lump sum (for recovery costs) is now automatically due in the event of non-payment. 

Other elements of the Act will remain unchanged, such as the statutory payment term of 30 calendar days (i.e. the default rule, absent a contractual provision), and the (high) interest rate applicable to late payment in commercial transactions (8% in 2021).

Related : NautaDutilh ( Mrs. Sophie Jacmain ,  Mr. Stan Brijs ,  Mr. LĂ©onard Maistriaux )

[+ http://www.nautadutilh.com]

Mrs. Sophie Jacmain Mrs. Sophie Jacmain
Partner
[email protected]
Mr. Stan Brijs Mr. Stan Brijs
Partner
[email protected]
Mr. LĂ©onard Maistriaux Mr. LĂ©onard Maistriaux
Associate
[email protected]

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